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Shareholders of cybersecurity vendor Palo Alto Networks take legal action against director John Key and others, alleging insider trading. Key says no merit to any of the claims

Technology / news
Shareholders of cybersecurity vendor Palo Alto Networks take legal action against director John Key and others, alleging insider trading. Key says no merit to any of the claims
[updated]
John Key

John Key, the former prime minister of New Zealand, is being sued by the shareholders of Palo Alto Networks (PAN) for alleged insider trading, along with other members of the well-known cybersecurity vendor's management team and board of directors. Key is a PAN director.

Others facing insider trading allegations include PAN founder Nir Zuk, the company's chief executive Nikesh Arora, and board director and Zoom chief operating officer Aparna Bawa.

Key says there's no merit to any of the claims.

Collectively, the company officials are alleged to have breached their "fiduciary duties as directors and/or officers of Palo Alto" and are accused of "unjust enrichment, abuse of control, gross mismanagement, [and] waste of corporate assets" and for having breached the US Securities Exchange Act.

The alleged wrongdoing is said to have taken place between August 18, 2023 and February 20 this year. Lawyers for the shareholders are asking for a jury trial to be held, and are seeking restitution from the defendants in the case, along with costs and expert fees.

PAN shareholders allege the company officials made false and misleading statements about PAN's products, such as the Cortex XSIAM artificial intelligence security automation platform being adopted by customers. The court filing refers to a earnings call on February 20 this year, during which Arora revealed that several US federal government deals didn't close and the company lowered its guidance for the third quarter of the 2024 financial year.

As a result of the news, the PAN share price dropped by almost 28% the following day.

'Unproven allegations'

Key has been a director of PAN since 2019, and also chairs the company's audit committee. Key says along with the other PAN directors, he has been named in a series of copycat lawsuits brought by three shareholders "based on unproven allegations" against the company in relation to its second quarter earnings update.

"Such lawsuits are not uncommon in the United States hence why this action has received very little media coverage offshore. In my view there is no merit to any of the claims," Key says.

"Palo Alto Networks has very strict share trading policies for its senior management and directors inline with Securities and Exchange Commission guidelines. At all times I have followed these rules."

Key sold 2297 PAN shares on December 18, 2023 US time, for US$709,175 according to the court application. Chief executive Arora sold shares for over US$159 million, and founder Zuk earnt almost US$33.2 million for selling 108,000 shares in PAN.

Other company officials also sold large amounts of PAN shares. The total amount of alleged insider trading is said to exceed US$265 million.

For the second quarter of its 2024 financial year, PAN reported a revenue increase of 19% to US$1.975 billion. The company makes information security hardware and software such as firewalls, and supplies threat intelligence for its customers. In April this year, PAN disclosed a serious vulnerability in its firewall operating system software, rated as 10 out of 10 in severity, which would allow remote code execution.

In 2023, Key received US$380,355 in total compensation from PAN, all of it in shares in the company. He stepped down from the position as chairman of ANZ NZ in March this year.

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31 Comments

Does look bad.

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17

To my mind this was a directorship he should have turned down - but I guess the ego wants it.

US directors liability, he doesn't have a tech background, doesn't live in the US. Why? He doesn't need the money and the ANZ Chairman was a big role.

 

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8

Ahh, so I had thought he smelled smoke and walked, but perhaps rather he was politely asked to leave the dumpster fire.

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18

He knows when to quit. Usually when he is ahead.

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5

Watch hollow men, outright liar.

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16

Smile and waves..nothing to see here..

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15

-

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0

its schactually not true

https://www.brainyquote.com/quotes/john_key_490308

You are not going to change me and if you do, it will look like a fraud, it will be a fraud.

John Key

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2

Just another ex national member sucking on the director teat.

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13

Least he is held accountable better than all the Labour chancellor of uni and labour mayors who waste tax/rate payers money even the former CEO of Kainga Ora ex labour. None of these people will get sued just smile and wave and get thr big tax funded cheques

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3

Not bad. We got quite a few comments in before somebody said 'Yes, but what about something else'

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14

Something else like a flag referendum?

 

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5

I love how the top comment from the article about him stepping down from ANZ Board was 

"..time to sell your shares." by rastus | 27th Feb 24, 10:17am

They were correct, just about the wrong company!

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13

Spicy 👀 👀 👀 👀 

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4

For those interested, the following is a link to all the filings from the SEC.

https://www.sec.gov/edgar/browse/?CIK=0001327567 

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5

If he was a United States Senator, it wouldn't have been a problem.

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11

The smiling assassin might finally stop smiling 

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15

He's a minnow in this one. Nothing here for the socialists to get excited about.

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3

It's those of us with moral codes, who disparage. 

And those with weak-to-no argument, who shoot messengers vis denigration. 

Perhaps you could raise your game?

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5

So hopefully no dodgy practices will be passed on to Max the developer!

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3

The horse has bolted..wonder what Max has been up to lately...??

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2

Can't say I have been.... 

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2

Correction:  Sir John Key

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0

Correction:  Sir John Key

Yes. Not Chon Kee or Lord Key. That's like saying Cindy instead of Dame Jacinda Kate Laurell Ardern GNZM. 

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6

More correctly, Prince John ... (given he has Luxon's ear).

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1

It was only a matter of time the guy is not trustworthy.

Just look at all the laundered money he let into this country and continually told New Zealanders that the laundered money was only 3 % of the property market.

A big part of why this country is in the mess we are in sits with John Key Starting from the GFC.

Glad to see the tail end of him and I was a big fan of him at one time until I worked him out.

Once a banker always a banker.

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28

Ah yes the good old special via category for China Southern Airline fliers which bypassed any health and character checks and allowed suitcases of laundered cash to flow in to the Auckland property market as kiwis watched in silence.
The interesting fact is that money is still in the Auckland property market, and when it is repatriated it will make the Chinese sell off of USD Bonds look like a petty cash reimbursement in relative terms.

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1

Suitcases of laundered cash? what on earth are you talking about?

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0

No surprises here. 

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12

How did I miss this? Perhaps because it's really not news in that civil cases are brought against company officers all the time in the USA.

(Will become news if he's on the wrong side of the outcome though. Unlikely though as these cases usually go nowhere.)

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3

Maybe John Key and Eric Watson could be cell Mates.

Two of our finest exports out of this country

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2